HomeMy WebLinkAbout07/06/1993, C-13 - ALTERNATIVE METHOD OF PROPERTY TAX DISTRIBUTION MEETING DATE:
�,�N�►�►ii�lllllll�pn�u►9�UIII city of San tins OBIspo 6 -- y3
COUNCIL AGENDA REPORT ITEM e-19
FROM: William C. Statler, Director of Finance
SUBJECT: ALTERNATIVE METHOD OF PROPERTY TAX DISTRIBUTION
CAO RECOMMENDATION
Adopt a resolution approving an alternative method of distributing property tax levies.
DISCUSSION
The County is considering an alternative method of distributing property tax revenues that
will benefit the City. Currently, apportionments are made by the County to the City based
on actual collections; this means that the City receives less than the current year amount
levied because of delinquencies. As detailed in the attached Memorandum from the County
Auditor-Controller and Administrative Officer, they are proposing an alternative method of
apportionment referred to as the "Teeter Plan" that would provide the City with its full levy
regardless of delinquencies. The key benefits to the City under this alternative method
include:
■ Simplifies the property tax revenue estimation and allocation process for all agencies.
■ Stabilizes property tax revenues.
■ Generates higher property tax revenues during years of higher property tax
delinquencies.
■ Provides a one-time increase in property tax revenues for all taxing agencies.
This results from the implementation component of this change: in the first year of
implementation, public agencies will receive 95% of all outstanding delinquencies as
well as the full amount of the current year levy due. The County estimates that the
one-tivne benefit to the City in 1993-94 could be as high as $500,000.
In order to be eligible for the alternativemethod for 1993-94, the City must adopt a
resolution approving this approach by July 15, 1993. The County Board of Supervisors must
also approve this alternative distribution method by July 15, 1993. In the event that they
do not approve the alternative method at that time, or they subsequently decide to rescind
their action because it is financially harmful to them as a result of State budget actions, then
property tax allocations will be made under the current system for 1993-94.
ATTACHMENTS
Resolution approving an alternative method of distributing property tax levies
Memorandum from the County Auditor-Controller and Administrative Officer regarding
alternative method of tax apportionment
�/3-/
RESOLUTION NO. (1993 Series)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO
APPROVING AN ALTERNATIVE METHOD OF DISTRIBUTING PROPERTY
TAX LEVIES AND ASSESSMENTS BY THE COUNTY OF SAN LUIS OBISPO
WHEREAS, on or before July 15, 1993, the County of San Luis Obispo will consider
making the election provided in Chapter 3 (commencing with Section 4701) of Part 8 of
Division 1 of the Revenue and Taxation Code which authorizes an alternative method for
distributing property tax levies and assessments on the secured roll for the 1993/94 fiscal
year and years thereafter as well as for delinquencies for prior fiscal years; and
WHEREAS, the County is prohibited from using such alternative method for any
public agency for which the County treasury is not the legal depositary unless such agency
agrees thereto by resolution of its governing body adopted not later than July 15, 1993; and
WHEREAS, the City of San Luis Obispo desires to have the provisions of said
alternative method made applicable to distributions made to it.
NOW THEREFORE, BE IT RESOLVED by the Council of the City of San Luis
Obispo that upon the County's election to implement the alternative method of distribution
authorized by Chapter 3, Part 8 of Division 1 of the Revenue and Taxation Code, it hereby
agrees with said alternative method as applicable to the City of San Luis Obispo.
BE IT FURTHER RESOLVED, that the City Clerk is hereby directed to transmit
a copy of this resolution to the Auditor-Controller of the County of San Luis Obispo
forthwith.
On motion of. ________:._ _ _ seconded by
and on be following roll call vote:
AYES:
NOES:
ABSENT
the foregoing Resolution was passed.and adopted this. ... day of June, 1993.
Mayor Peg Pinard —
ATTEST:
City Clerk
APPROVED:
tto
i I
County of San Luis G,,,.Lspo wo GL._X W. SMBACH, CPA
Office of the Auditor-Controller Auditor-Controller
Room 300 County Government Center BILL ESTRADA
San Luis Obispo, California 93408 Assistant
(805) 781-5040 FAX (805) 781-1220
TO: CITIES AND LOCAL TAXING DISTRICTS
FROM: GERE SIBBACH, COUNTY AUDITOR-CONTROLLER
ROBERT HENDRIX COUNTY ADMINISTRATIVE OFFICER
DATE: JUNE 117 1993
SUBJECT: ALTERNATIVE METHOD OF TAX APPORTIONMENT
(R&T CODE SECTION 4701 et seq 'Teeter Plan")
On or before July 15, 1993, we will be asking the SLO County Board of Supervisors to
consider adopting the alternative method of tax apportionment which has been an option
for counties for many years. The method is commonly known as the 'Teeter Plan" and is
authorized under Section 4701 et seq of the Revenue and Taxation Code.
We believe it is necessary for the County to position itself to take advantage of this
alternative because of the likelihood of additional tax shifts next fiscal year by the state
legislature. Depending on the specifics of the actual tax shift legislation, the one-time
benefit of collecting prior year taxes in the first year of implementation of the Teeter Plan
could significantly soften the financial blow to the County, the Cities, and the Special
Districts without harming the local schools in any way. It would also provide a predictable
cash flow from secured property taxes in future years,without the worry of delinquent taxes.
The Teeter Plan could be a win-win situation for the County and other taxing agencies.
However,we strongly recommend that your agency not count on the use of this new revenue
until the State and Local Budget processes are complete. Attached is an issues paper with
more details.
Under the law, "Public Districts"for which the County Treasury is the legal depositary would
automatically be included in the Teeter plan. This would include all County Board-governed
special districts, all schools, fire, sanitary, and cemetery districts. Any "Public District" for
which the County Treasury is not the legal depositary (even if it voluntarily uses the Treasury
Pool) can participate in this alternative method onlyif the governing board of the district
adopts a resolution on or before July 15. This would include cities, community service
districts, and other independent districts. Attached is a sample resolution which would meet
this requirement.
67
Alternative Method of Tax Apportionment
June 11, 1993
page 2
We have also attached some rough calculations for a typical agency which show a
comparison of the current method and the Teeter method of distribution for Year 1 and
Year 2. When the state budget details are known (and the details of the shift mechanism
are clears an actual comparison could be made for each agency. We believe, however, that
the mathematics of the Teeter Plan would always create a significant one-time benefit for
taxing agencies in the first year of implementation.
If after examining the actual state budget and its implementing legislation we find that this
alternative method is not financially advantageous to the County, sometime before the 1993-
94 property tax bills are mailed, we will recommend that the Board of Supervisors rescind
their decision to adopt the Teeter Plan. We would then proceed to allocate taxes to all
agencies as would have been done under existing law and procedures for the 1993-94 fiscal
year and all prior years. On the other hand, should the County decide to implement the
Teeter Plan,we also see no reason why any individual City or District could not rescind their
decision to "opt in" as long as such decision was made prior to September 30, 1993. After
that date, we would normally begin the tax allocation processes and a decision to "opt out"
by a City or District would be too late to implement for that year.
We apologize for the short time frames for your agency to act. We only recently became
aware of the potential advantages of this method ourselves. Nevertheless, under existing law
your agency must act by July 15. 1993 to keep its option open to "opt in". The possibility
to "opt out" will be available to your district through September 30, 1993. We would be
willing to schedule some meetings with your representatives during the month of August to
fully describe the mechanisms involved, and (hopefully) to review the impact of the State
Budget settlement.
We have also scheduled a meeting next Thursday,June 17, to answer any questions you may
have about the Teeter Plan, based on the current law. The informational meeting will be
held from 3:00 PM to 5:00 PM in the CiZt/County Library Conference Room (Corner of
Palm and Osos in SLO, small conference room downstairs). In the meantime,you may call
Gere Sibbach or Marsha Stillman in the Auditor's Office at 781-5037 if they can be of
assistance to you.
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L'�3
ALTERNATE METHOD OF TAX APPORTIONMENT (TEETER)
Background:
In 1949, the State Legislature adopted Revenue and Taxation Code section 4701
which authorized the "Alternative Method of Property Tax Distribution" . This
alternative method was proposed by the Contra Costa Auditor-Controller whose last
name was Teeter, and therefore, the method is sometimes referred to as the
"Teeter" plan. As stated in section 4701, "It is . . . the object of this
alternative procedure to accomplish a simplification of the tax-levying and tax-
apportioning process and an increased flexibility in the use of available cash
resources" . This method has been used by Contra Costa County for over 40 years
and is used in four other counties (Solano, Siskiyou, E1 Dorado and Toulomme) .
It is our understanding that many other counties are considering it for fiscal
year 1993/94.
In simple terms, this distribution method authorizes the Auditor-Controller to
allocate to agencies 100% of the secured property taxes billed, but not yet paid;
whereas, the current method only allows allocation of secured property taxes paid
(property taxes billed minus delinquent taxes) . Delinquent taxes, penalties and
interest are allocated, when collected, by a separate allocation process.
Therefore, the alternate method only requires one allocation process; whereas,
the current (old) method requires two allocation processes.
As described later in this issue paper, the alternate method offers the following
benefits:
- Simplifies the property tax revenue estimation and allocation process for
the agencies and the Auditor-Controller.
- Stabilizes property tax revenues.
- Generates higher property tax revenues during years of higher property tax
delinquencies.
- Provides a one time increase in property tax revenues to all taxing
agencies.
Potential benefits:
During years in which the delinquent taxes are increasing, each agency would
receive more property taxes under the alternate method versus the current method.
Likewise, during years the delinquent taxes are decreasing, the opposite would
be experienced. During the last three years, delinquent taxes have increased.
We believe all taxing jurisdictions would have received more property taxes
during this three year time period under the alternate method.
However, the single largest benefit of the alternate method is the one time
allocation of the prior years ' delinquent property taxes. Once the decision is
made to use this method, 95% of delinquent property taxes will be allocated to
all agencies as if they had been collected. In addition, as the delinquent
property taxes are collected, the Tax Collector collects penalties (10%) and
interest (18%) . These funds are deposited to a Tax Loss Reserve Fund required
by the alternative method. When the total proceeds in this fund exceeds 4% of
ew-lo
the current year property tax levy, the excess is credited to the County General
Fund. These penalties and interest will be used to pay interest expense for the
tax advances to all agencies.
In addition to the dollar benefits, the alternate method allows the taxing
agencies to accurately estimate their annual property tax revenues. Under the
alternate method, the agencies know that they will receive 100% of the secured
property taxes billed. After the Assessor submits the property tax roll to the
Auditor, and the property value changes are calculated, we know the total secured
property taxes that will be billed. Based on its allocation factor, each taxing
agency will receive 100% of its portion of the total and will not receive
delinquent secured taxes and penalties.
Under the current method, estimating the property tax revenues is very complex.
First, taxing agencies must obtain, from the Auditor, the total secured property
taxes billed. From this amount, they would subtract their estimate of the annual
delinquent taxes. This would determine the net Current Year Secured Tax Revenue.
Second, they must estimate the amount to be collected on Prior Year Property
Taxes and Penalties and Interest. This amount is very difficult to estimate.
Remaining issues:
As mentioned above, during the first year of using the alternate method, it is
necessary to pay to the participating taxing jurisdictions an amount equal to the
total prior and current delinquent secured property taxes outstanding. In
addition, the County must establish a reserve equal to 4% of the total tax levy.
We are proposing to use internal financing which would include using all of the
one-time Teeter revenue to the County General Fund to finance the required
advances and the reserve. As the delinquent property taxes and penalties are
collected, we will repay the principal and interest on the borrowing. The excess
penalties and interest will go to the Tax Loss Reserve Fund and be distributed
to the County General Fund at some time in the future after they equal 4% of the
tax levy.
Many California counties are looking into the feasibility of changing to the
alternate method. We are in the process of comparing our studies of the effects,
determining the best method of financing the plan, and discussing the possible
changes to our property tax computer systems.
Steps to Implementation:
- Resolve the issues discussed above.
- Communicate this change to the taxing jurisdictions within San Luis Obispo
County.
- Prepare a Board of Supervisors resolution, by July 15, 1993, for adoption.
- Implement any system modifications prior to the first property tax
allocation, December, 1993.
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1111111 III ������ IIII�IIIIIIIIII� II
city of sAn tuis oaspo
25 Prado Road • San Luis Obispo, CA 93401 ,
July 6, 1993
To: City Council
From: Howard C. Brown, Chairman, Tree Committee
Subject: Monterey Pine Tree belonging to Mr. and Mrs. Richard Kriet
at 206 Marlene Drive, San Luis Obispo
In his request for removing the tree, Mr. Kriet listed as the number one reason that it
was knocking over an existing retaining wall. Also, that the tree interfered with drainage
for the lawn and patio.
The Tree Committee's response was:
1. The pine is a fine specimen tree that contributes to the skyline of the area. It is
an asset to the neighborhood.
2. The location of the tree is such that it helps to hold the bank in place.
3. A new retaining wall can be built and backyard drainage can be established
without the tree's removal.
4. Although the tree has poor crotch formation, it is in good health and should last
many years.
In the second request for removal, Mrs. Kriet stated that several arborists agreed that a
retaining wall could be installed without hurting the tree. She was concerned with the
tree undermining the house foundation. It has been the experience of the Tree
Committee that a Monterey Pine that distance from the house does not cause foundation
problems. One arborist reported that the tree had bark beetles. The San Luis Obispo
City Arborist did not find evidence of beetle damage.
krict-agd.mem/tm#2
T- ~
RESOLUTION NO. (1993 SERIES)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SAN LUIS OBISPO TO APPROVE TREE REMOVAL
REQUEST AT 206 MARLENE DRIVE
WHEREAS, the San Luis Obispo Tree Committee has denied Laurie
Ann Kriet's request to remove the tree at 206 Marlene Drive in San
Luis Obispo; and '
WHEREAS, the San Luis Obispo Tree Committee has reviewed Mr.
and Mrs. Kriet's request for the tree removal located at 206
Marlene Drive and found the tree in question was in good health and
contributed favorably to the neighborhood; and
WHEREAS, the San Luis Obispo Tree Committee has heard the
appeal of Mr. and Mrs. Kriet's request and propose that the
retaining wall the Kriet's propose to build be constructed without
removing the tree; and
WHEREAS, the City Council did take testimony on an appeal of
the Tree Committee's decision, said testimony being substantive and
compelling.
NOW, THEREFORE BE IT RESOLVED that the City Council of the
City of San Luis Obispo does hereby reverse the decision of the
Tree Committee and approves the tree removal request at 206 Marlene
Drive.
Upon motion of , seconded by
and on the following roll call vote:
AYES:
NOES:
ABSENT:
the foregoing resolution was adopted this day of ,
1993 .
Mayor Peg Pinard
ATTEST:
Diane Gladwell, City Clerk
7
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Cly of5�11.1,11S OBISPO
y
25 Prado Road • San Luis Obispo, CA 93401
July 6, 1993
To: City Council
From: Howard C. Brown, Chairman, Tree Committee
Subject: Monterey Pine Tree belonging to Mr. and Mrs. Richard Kriet
at 206 Marlene Drive, San Luis Obispo
In his request for removing the tree, Mr. Kriet listed as the number one reason that it
was knocking over an existing retaining wall. Also, that the tree interfered with drainage
for the lawn and patio.
The Tree Committee's response was:
1. The pine is a fine specimen tree that contributes to the skyline of the area. It is
an asset to the neighborhood.
2. The location of the tree is such that it helps to hold the bank in place.
3. A new retaining wall can be built and backyard drainage can be established
without the tree's removal.
4. Although the tree has poor crotch formation, it is in good health and should last
many years.
In the second request for removal, Mrs. Kriet stated that several arborists agreed that a
retaining wall could be installed without hurting the tree. She was concerned with the
tree undermining the house foundation. It has been the experience of the Tree
Committee that a Monterey Pine that distance from the house does not cause foundation
problems. One arborist reported that the tree had bark beetles. The San Luis Obispo
City Arborist did not find evidence of beetle damage.
kriet-agd.mem/tm#2